Hit by double whammy?the ongoing CBI investigation into real estate deals as a part of bribery for loan scams and Supreme Court demanding a probe in to bank funding of 2G telecom licences?the banks are now in developing counter strategies for them as they fear it will affect their credit decision for large projects.
The bankers are meeting on December 15 under the forum of Indian Banks? Association (IBA) to chart out next course of action including taking up these issues with ministry of finance. Particularly, they felt strongly about SC asking a probe into funding of 2G licence.
?We have funded the operations of 2G players after government had allocated licence. In what way we are blamed for this? Secondly, if government cancels their licences, it will help us get the money back,?? said a CMD of a prominent public sector bank(PSB).
The entire banking sector is supposed to have an exposure of nearly Rs 25,000 crore in the telecom sector including 10,000 crore in 2G telecom licences.
?We are deeply affected by these developments. When government wants banks to take quick decision on infra funding, these events will definitely deter us from taking any decision on large projects,? said a another CMD of a PSB adding that banks were planning to discuss these issues with MoF soon.
On being asked what would be the possible strategies when they meet at Indian Bank’s Association (IBA) headquarter in Mumbai, a senior IBA functionary did not wish to comment.
Bank of Baroda executive director RK Bakshi said, ?Yes, we have almost stopped giving credit to the telecom sector as the sector was marred with lots of uncertainties over consolidation and licences.?
The bank is more focusing on other segments for credit growth like SME, steel, cement, power, chemical and fertiliser. Central Bank of India ED RK Dubey admitted that there would be some dampening effect on credit flow to large projects for some time because of ongoing developments.
?Our focus for credit growth will be the sectors like retail, SME, agriculture, priority sector and chosen good corporates,” he said.
A senior official of Bank of India said the bank’s exposure to the telecom sector was at Rs 4,000 crore, comprised 3% of its entire loan book. ?All the remark made by the apex court on the issue was off-the-cuff one. Let them look at greater details on the topic. We also don’t know how the government is going to handle it. The entire money given by us to them was based on licence. So, it is upto the government to resolve the issue,? he said. BoI would like the dust to settle down first before going for further financing to the sector. ?When there was so much of controversy, how do you expect banks to going on financing them,?he remarked.
Another CMD of a PSB which has exposure in 2G explained that banking business was all about taking risks and said ?we found a good risk in the financing of the 2G spectrum players.?
Secondly, most of the players on the telecom space were backed by various governments and hence the bank financed them. Thirdly, telecom falls under the category of infrastructure and the government is focusing a lot on the sector hence bank was comfortable in financing them. A spokesperson of Punjab National Bank said that the bank had become cautious in taking any decision on large projects. ?Yes, we have become cautious while taking any decision on large projects,? said the official.